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Classifications of the items related to the premium plan

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Reference no: EM132508728

PC Company offers a coffee mug as a premium for every ten sh.5 candy bar wrappers presented by customers together with sh10.00. The purchase price of each mug to the company is sh.9; in addition it costs sh.6 to mail each mug.

The results of the premium plan for the years 2018 and 2019 are as follows (assume all purchases and sales are for cash):

                                                            2018                              2019

Coffee mugs purchased                          720,000                      800,000

Candy bars sold                                   5,600,000                    6,750,000

Wrappers redeemed                                 2,800,000                    4,200,000

2018 wrappers expected to be redeemed in 2019  2,000,000

2019 wrappers expected to be redeemed in 2020                               2,700,000

Required

Question (a) Prepare the general journal entries that should be made in 2018 and 2019 related to the above plan by PC Co.

Question (b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the PC Company statement of financial position and income statement at the end of 2018 and 2019.

Reference no: EM132508728

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